Spokane Public Power Co. purchases transformers at a cost of $330 and uses an ordering cost of $45 per order. Inventory is carried at a cost of 10 percent of the per-unit price (based on average inventory). Storage costs, based upon adequate space for maximum inventory, are $6 per transformer. Annual demand is 800 units.
A) Compute the total yearly cost if the firm orders in EOQ amounts.
B) The supplier has offered the power company a 10 percent discount for purchasing in quantities of 200. Assuming this affects all costs except ordering and per-unit storage costs, compute the total yearly cost for this quantity discount situation.